United States: Employer´s Policy Prohibiting Employees From Revealing Compensation Or Terms Of Employment Violates National Labor Relations Act

The National Labor Relations Board (the "Board") ruled that a non-union employer violated Section 8(a)(1) of the National Labor Relations Act (the "NLRA") by: (1) maintaining an overly broad confidentiality provision, which could be reasonably construed by employees as prohibiting discussion of terms of employment with a union representative; and (2) terminating an employee for breaching the confidentiality provision. Northeastern Land Services Ltd. d/b/a NLS Group, 352 N.L.R.B. No. 89 (June 27, 2008).

Factual Backdrop

NLS Group is a temporary agency that provides its employees to companies in the natural gas pipeline and telecommunications industries. One of NLS Group's clients is El Paso Energy ("El Paso").

Jamison Dupuy ("Dupuy") was hired by NLS Group to work on a project for El Paso. Before beginning his employment, Dupuy signed a temporary employment agreement containing a confidentiality provision, which read as follows: "Employee also understands that the terms of his employment, including compensation, are confidential to Employee and the NLS Group. Disclosure of these terms to other parties may constitute grounds for dismissal."

During the course of his work on the El Paso project, Dupuy experienced some pay-related issues. First, Dupuy was unable to timely access the wages directly deposited to his account by the NLS Group. Dupuy discussed his problems with delayed payments with the Executive Vice President and Chief Operating Officer ("COO") of NLS Group, warning them that he would tell El Paso's Project Manager that he was quitting if the payments were not received in a timely manner. NLS Group's COO informed Dupuy that El Paso would not be able to change the pay arrangement to accommodate Dupuy's demands. Dupuy confronted El Paso's Project Manager directly regarding the delayed payments and asked if he could continue to work for El Paso through a different employment agency. El Paso's Project Manager explained that such an arrangement would not be possible.

Dupuy then experienced another pay-related problem. Dupuy had previously arranged with El Paso to be reimbursed $15 per day by NLS Group for work-related use of his personal computer. At first, NLS Group reimbursed Dupuy for the full $15 per day. However, it later notified Dupuy that his computer usage reimbursement rate would be reduced to $12 per day for tax-related reasons. Dupuy protested the change in reimbursement in an email he addressed to NLS Group's COO, to which he copied El Paso's Project Manager. In the email, Dupuy asked that El Paso offset the $3 differential. Dupuy further noted that he would be "offline" until the issue was resolved. NLS Group terminated Dupuy, citing Dupuy's breach of the confidentiality provision by disclosure of his terms of employment to another party, i.e., El Paso.

Validity of Confidentiality Provisions

The Board's General Counsel issued a complaint alleging that NLS Group violated Section 8(a)(1) of the NLRA because it maintained an overly broad confidentiality provision and because it terminated Dupuy on the basis of the provision.

The Board has previously articulated the following standard in Lutheran Heritage Village-Livonia, 343 N.L.R.B. 646 (2004) to determine if a work rule maintained by an employer violates Section 8(a)(1) of the Act:

If the rule explicitly restricts Section 7 activity, it is unlawful . . . If the rule does not explicitly restrict Section 7 activity, it is nonetheless unlawful if (1) employees would reasonably construe the language of the rule to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights.¹

Applying this standard, the Board held that NLS Group's confidentiality provision, which prohibited employees from disclosing terms of their employment with "other parties," could be reasonably construed by employees to prohibit Section 7 activity. Specifically, the Board found that employees could reasonably understand the confidentiality provision as prohibiting discussion of their compensation with union representatives. The Board chose not to pass judgment on whether the provision also could be interpreted as prohibiting employees from discussing terms of their employment with one another, which would be yet another violation of Section 7 of the NLRA. Finding the confidentiality provision to be unlawfully overbroad, the Board held that Dupuy's termination violated Section 8(a)(1) of the Act.

What This Means for Employers

Many employers currently maintain confidentiality provisions relative to compensation and other benefits of employment. Restricting disclosure of terms of employment, such as compensation, from clientele may be necessary for an employer to remain competitive in an industry. However, if an employer maintains an overly broad confidentiality provision that can be interpreted as restricting an employee's right to discuss terms of employment with union representatives or other employees, it runs the risk of violating the NLRA, even in a situation where the disclosure could have been restricted if subject to a narrowly tailored non-disclosure rule. Employers may want to review their confidentiality provisions and seek the assistance of counsel where necessary to assure that any such restrictions are narrow and well defined.

Footnote

1 Section 7 states in relevant part:

Employees shall have the right to self-organization, to form, join or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection. . . .

29 U.S.C. §157.

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